Homeowners in the U.S. are suing some of the world's biggest banks for fraud--not over any foreclosure issues but over the alleged Libor manipulation scam that they say sparked increases on their adjustable rate mortgages, and resulted in unlawful profits for the banks.

A class action lawsuit brought by lead plaintiffs from Alabama was filed today in New York accusing big banks like Bank Of America, Citigroup, Barclays, UBS, JPMorgan Chase, Deutsche Bank and others of fraud. According to lawsuit, for at least 10 years between 2000 and 2009 the banks conspired to falsely increase the Libor on the first day of each month for the purpose of increasing the rates on homeowners mortgages.

The manipulated higher rates resulted in increased net revenues as banks earned hundreds of millions, if not billions of dollars, in wrongful profits as a result, the suit alleges.

Banks are denying the allegations.

Here's how the plaintiffs says the banks wronged them. They were offered and then took adjustable mortgages whose rates were scheduled to reset on the first day of given months. Mortgage rates are based off Libor, or the London Inter-Bank Offer Rate.

Put simply, the Libor rate is the rate at which banks are able to borrow money from each other. An agency called the British Bankers Association surveys a group of banks everyday asks the following: If you were to borrow money this morning at 11am London time what you would have to pay for it?

The problem, say plaintiffs in the suit, is that banks were submitting artificially inflated Libor rates around the first day of each month in order to push their mortgage rates higher and make bigger profits. From the suit:

Throughout the Class Period, the LIBOR 6 month rates on the first business day of each month are, on average, more than two basis points higher than the average LIBOR 6 month rates throughout the Class Period. Additionally, from August, 2007 through February, 2009, the LIBOR 6 month rates on the first business day of each month are, on average, more than seven and one-half basis points higher than the average LIBOR 6 month rates. Finally, the LIBOR 6 month rates on the first business day of each month are, the great majority of the time, higher than the five-day running average of the LIBOR 6 month rate surrounding the first business day submissions throughout the Class Period.

Why does this suit matter? Well, for one it could include 100,000 plaintiffs who have lost thousands of dollars each, plaintiffs' attorney John Sharbrough tells the FT.

On a larger scale the homeowners are just one more group going after banks for their alleged Libor manipulation scandal which erupted this summer when Barclays was forced to pay $450 million to settle charges that its traders rigged the rate.

The rate is one of the most significant benchmarks in finance with some $300 trillion in financial contracts tied to Libor. Homeowners are just the latest group to come out and say they were hurt by rigged rates.

Earlier this year three plaintiff groups including Charles Schwab and the City of Baltimore filed suits against the 16 banks that submit Libor rates accusing them of collusion, or price fixing, under the Sherman Antitrust Act. (The same Act is being used in the homeowner's suit today.) It’s a damning allegation that has the potential to cost banks hundreds of billions of dollars.

The good news for banks? The burden is on plaintiffs to prove the banks colluded to price fix Libor, and that burden is heavy.

Nomura analyst Glenn Schorr wrote in a July note, "The complexity of the LIBOR setting process and specific legal protections could make it very hard to prove joint manipulation and even quantify losses given any banks limited ability to impact the average rate [Libor] that was used."

Proving collusion won't be easy, but banks will have to keep refilling their litigation reserves just in case. A strategy many big firms have been accustomed to since the 2008 crisis.